Corporate CEOs Dance the Economic Catch-22 Boogie
Economics 101: Healthy economies include low unemployment rates. Low unemployment rates mean consumers are consuming/buying goods. Consumers buying goods stimulates the economy, creates growth.
Economics 101 corollary: Sluggish economies include high unemployment rates, tight credit. In sluggish economies, consumers buy less, pay down debt, and the economy remains sluggish.
Until the unemployment rates drop, at which time more consumers have more money with which to consume.
Makes sense, right? Well, yes, until you read this Washington Post article where they interview corporate CEOs about why it might be that they're sitting on piles of cash and not hiring. Then it just gets really, really weird.
According to these CEOs, it's not really the national debt, the deficit or a need for more stimulus that's keeping them from hiring and allowing them to hoard cash. No, it's the consumer, who sparks a big no-confidence vote in them.
They blame their profound caution on their view that U.S. consumers are destined to disappoint for many years. As a result, they say, the economy is unlikely to see the kind of almost unbroken prosperity of the quarter-century that preceded the financial crisis.
They really don't address the question of why they're hoarding trillions in cash instead of reinvesting in their business or {gasp} hiring again. They have some vague objections to legislation that's passed in this Congress, but nothing specific.
But when Speer and other executives were pressed on the role that tax and regulatory policies play in hiring, they drew only vague connections. Speer said his decision whether to hire is driven primarily by demand for his products. Orders are coming in strong enough that he is running about 20 hours a week of overtime. So he is weighing whether to hire two or three additional manufacturing workers.
None of the executives interviewed linked a specific new government initiative with a specific decision to refrain from hiring.
What we have here is the corporate Catch-22 boogie. We know it and they know it. We, the consumers, cannot and will not be spending anything until we're employed again. They the businesses, can, but will not, hire until we spend again. They would prefer to pay existing employees overtime than to hire new employees to fill the ranks of the employed.
I don't buy it. It sounds like the kind of political gobbledegook that gets spit out when the answer is right there in front of everyone like a pink elephant in a tutu. These guys are holding out for a Congress that they believe will give them the tax breaks and regulatory relief they expect and have been used to receiving in the past.
I called it a Catch-22, but really, it's a siege. They are mounting a siege against the middle class in this country -- their own customers, by the way -- in order to get leverage and the right to rewrite rules, including union contracts and pay rates that are below those of the past.
This is why small businesses really do need Congress' intervention. If they can get credit, they'll hire and we'll get some creative new industries going instead of just caving into the fat cats with trillions waiting to be sent off to Haley Barbour or some other teabag organization to defeat progress.
http://www.youtube.com/watch?v=CUxUbYUHExs&fe...
small businesses closing every week. There is no demand for the smaller services they offer. The people that are unemployed are only buying necessities. Those that are employed haven't had raises in years so their dollars don't go as far so they cut back. You can't create a demand for everything by just making it available, it has to be affordable. No wages and low wages will not create a demand.
Small businesses are running into the very same wall as large corporations; the American consumer is tapped out. The entire last decade was fueled by cheap credit and a housing boom. Also, over the long-term, wages and benefits have been stagnant or declining.
These problems don't go away overnight; they are structural in nature. Many of the jobs lost are gone for good. Americans embraced the "service economy," free trade, and globalization with open arms, and now we are paying the price.
It's a dubious assertion that the extension of credit to small businesses would change our nation's fortunes given the fact that people (for good reason) are not spending very much money.
The investor class sits on trillions of dollars in potential stimulus while Congress cannot find the will to borrow a few hundred billion for stimulus.
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More's the pity that Congress won't just take the trillions back from the investor class. They stole it from us, let's get it back.
BINGO!
I've been saying this for years.
Why not make the richest American's, those millionaires and billionaires who reside in the richest 2% - and who got 66% of Bush's $2.1 trillion dollar wealth transfer (so-called tax cut) - give back all of the money today! They would still be millions ahead just on their investments. Wouldn't hurt them one single bit!
That would be an additional $1.4 trillion for stimulus and job creation. We need it desperately, because the multinational parasites have no intention of ever hiring again unless it's some slave wage position in the global (cheap labor conservative) market.
That and reinstate progressive marginal rates up to 95% for anything over $5 million a year. That will curb CEO pay thievery.
And put the Hedge fund criminals in the same tax bracket. Let em' steal a billion dollars then who cares? $940 million of it will go right back into the public coffers - where it belongs.
Rush Limbaugh is what a smart person thinks a stupid bigot sounds like.
to fuel the "economy" in a finite system seems problematic at best. Plus I think the planet was overpopulated 5 billion or so ago. That reminds me, I need a new mouse.
Be as you wish to seem
Or they put folks in mid-level salaried positions & expect them to pick up the slack for the people they won't hire, for no extra pay. Corporate America is going to kill us & then themselves.
It's not all or nothing.
Want new slaves, but don't wanna shell out any money FOR them. They want to get their slaves for free. Therefore, they can keep their fucking money and whinge all they want that no one's buying their shit. Fuck 'em!
Henry Ford figured this a long time ago. You ain't gonna sell your product if people can't afford it, and seeing as credit has dried up, people AIN'T gonna be buying anytime soon.
SUCH visionaries...
Henry Ford as you should. He paid the top wage to get the best workers but also, principally, to keep the unions at bay as long as he could. His son Edsel, on the other hand, tried to work with other businessman to use the humongous piles of cash Ford Motor company had (they didn't count it, they weighed it) to stop the wave of bank failures that contributed so nicely to the Great Depression. Henry cut him off at the knees (as he always did) and refused to have anything to do with it. On the other hand Henry did find a way to keep the cash rolling into his own pockets by forcing his distribution network to buy unsellable stock at the peril of losing their franchises. A great many did fail of course because they couldn't sell the cars he required them to buy. Henry Ford was a mean spirited bastard. There was a reason his son ultimately committed suicide.
Hasa Diga Eebowai
Edsel Ford did not commit suicide!
He died from stomach cancer, which he battled for several months.
Most people attributed Henry's constant horrible, humiliating treatment of his son, for eventually causing the ulcers and cancer that ultimately took his life.
In fact, Henry Ford's wife was so upset afterword, that she was the one responsible for getting Henry the Deuce put in charge of Ford Motor company after his father Edsel had died.
She told Henry, if he didn't get rid of his shady henchmen and let Henry the 2nd take over, she would leave him.
Henry Ford the 2nd then faced his grandfather's henchman and told him to get out, that he was through. The henchman called Henry Ford, just like he did when he threw Edsel out of his office and henry Ford backed the shady henchman over his own son!
But things would be different this time around.
Grandma Ford had made sure that would never happen again.
When the henchman called Henry to put Henry the 2nd in his place, Henry Ford wouldn't take his henchman's call, and that was the beginning of Henry Ford the 2nd running Ford motor company for the next four decades.
But you are right about him being a mean spirited bastard. Everyone who worked for him and made the company great, he eventually fired and ran out of the company. One of them went on to become a U.S. Senator from Michigan, and spent years in congress f**king with Henry's head constantly.
Like my aunt always said; "what goes around, comes around."
Rush Limbaugh is what a smart person thinks a stupid bigot sounds like.
Anyone who gets regular UPS service and is familiar with his or her driver ought to ask the driver what's going on in the company. Drivers are scheduled for 55-60 hours weeks (they have mandatory overtime as part of their union contract) and the company lays off drivers that are not needed due to the expanded overtime. This has been going on for over a year now and the drivers explain that the company's reasoning is they can save money by not hiring new employees and save on benefits by laying off as well.
If this is an example of how corporate America is maximizing profit we can expect that it will be a long time before unemployment goes down.
If the employees were part time, they probably wouldn't even have benefits. So, double your employees and they'll all be part timers.
Supply-siders like Lawrence Kudlow, Peter Schiff, and the rest of the Right Wing Echo Chamber have been pushing the story that businesses aren't hiring because they are uncertain about the Bush tax cuts expiring, and the Obama administration's "bailout takeover tax hike big government" agenda. It's all bullshit, and they know it.
It's the consumers who are uncertain. Uncertain that Big Business (called small business by the Right) will ever hire workers again now that they have been able to make record profits by using the minimum workforce they've got now.
Peter Schiff wasn't right. Robert Reich was right. They just don't have the integrity to admit it.
that do hire don't pay a living wage and the larger businesses want to lower the wages. This week I heard that Boeing wants to hire 10,000 people but can't find experienced workers. I remember when they would hire and train.
It's worth looking at Mr. Amato's post recent post: Cheap Labor Conservatives
This is the end game. It was all too obvious when I worked for EDS, a subsidiary of GM, in the 90s. Now I teach English overseas, and have done for 13 years.
http://crooksandliars.com/clsphinx?keys=cheap...
PS wages continue to rise in Korea. This year's growth forecast is 5%.
"If the US government enforced its banking laws like it did its park regulations, we wouldn't be
in this damn park in the first place." OCCUPY.!!
Seems like I remember reading in the history books about another President who took over at the beginning of a depression. Didn't he implement a huge public works program to get people back to work? Yeah, I know, big government, but at least the money lost from the treasury went directly to the workers/consumers therefore spurring the economy? If we just give the money to the "small business" interests they will just keep a percentage for themselves and maybe only employ a fraction of the people needed to get the economy going again. We definitely have enough infrastructure work to get this country going again. Of course that would be too "bold" for this administration. Best to play it "safe" and give the money to the "small business" interests and hope they do the right thing. Too bad they rarely do the right thing though.
Never mind. Phylter beat me to it.
a) Did not have a degree in business
b) Was relatively smart
c) He got his wealth the old fashion way: by earning it.
d) Too bad he was an unabashed anti-Semite and fascist who played both sides of WWII for all it was worth.
CTHULHU 2012 "Why vote for a lesser evil?"
It may well be a catch-22 but it doesn't make the dilemma any less real. The CEOs you speak of owe a fiduciary responsibility to their shareholders. I suspect that any that tried to expand production to meet non-existent demand would probably face a shareholder revolt. To stimulate demand for their products, whatever that might be, they use advertising and rebate programs and financing deals. They don't stimulate demand for other people's products. General economic stimulus of the required nature is solely the responsibility of government.
Hasa Diga Eebowai
doing everything to break the back of the middle class worker and drive up their quarterly profits.
They won't hire Americans until Americans are desperate enough to work under terms, salaries and conditions that would make a sweatshop worker blush.
These coporations who are sitting on trillions of OUR stimulus money, refusing to hire American workers, should suddenly find DoJ lawyers knocking on their doors.
"Civilized men are more discourteous than savages because they know they can be impolite without having their skulls split, as a general thing." -- Robert E. Howard
At EDS we had an "open-door policy", which (supposedly) meant we had a meagre voice. The joke got to be, "If you don't like it, if you spoke up, there's the door, use it." We could be fired for discussing our own wages with each other (obviously because they were not equal: ass-kissers, back-stabbers and "middle management" got perks, overtime, and raises, the rest didn't.)
After 5 years (contract over), they packed up shop and fired everyone. So much for all the promises (of security) made when joining "the family": everyone got shafted.
We were as disposable as used paper napkins, as was the plan from day 1.
"If the US government enforced its banking laws like it did its park regulations, we wouldn't be
in this damn park in the first place." OCCUPY.!!
I listened in on the last earnings call with Wall Street Analysts for the company where I am contracting (read, temp IT admin).
This past fiscal year, profits were up 19 percent. But over the course of that same fiscal year, they were on a spending spree as the cash poured in and no one was minding the store properly. Horrible, horrible management. High price consulting firms were brought in for projects that should have been spread over longer terms or handled in house, the corporate jet never got a rest and operating costs skyrocketed so net income took a nosedive (though they still made a good profit).
Bottom line (literally) was they got rid of 700 positions (employees and open hire rec's) as it was the only way to appese the analysts and The Street.
"I don't buy it. It sounds like the kind of political gobbledegook that gets spit out when the answer is right there in front of everyone like a pink elephant in a tutu."
Absolutely I agree, and I love the way you phrased it :)
...Our recent economic prosperity has been in the form of bubbles. American consumers have learned to consume beyond their means and the economy has come to depend on that. For years economists (and others) have been saying that Americans save too little, but we can't save more and simultaneously consume at the same levels we have in the past. This also affects the rest of the world's economies since many of them have also come to rely on the US consumer.
Somehow we have to employ more people than in the past at the same time we are consuming less and saving more and I don't think anyone has figured out how to make the transition from unsustainable bubblenomics to a responsible economic model. Worse still, it may not be possible to employ as many people as in the past if we move to a more sustainable model. But an economy that can't employ the vast majority of its workers is also not sustainable, which means that the model we have to adopt may not be sustainable.
As if all that weren't bad enough, a healthy, sustainable economy should actually manufacture some of that economy's key products and the US has downsized much of that manufacturing overseas where wages are much lower. If the only way we can compete in this area is to lower our wages to third world levels, then the re-introduction of manufacturing will create a new, poverty-wage class of people. And those people won't be able to consume or save at the levels necessary to support a sustainable economy.
aren't buying Barack. The haters refuse to believe it's the Summer of Recovery.
pure and simple... selfish greed.
"i got mine. get your own."
Nail on the head: "These guys are holding out for a Congress that they believe will give them the tax breaks and regulatory relief they expect and have been used to receiving in the past."
Ever since 'they' bought the services of the Iranian Hostage takers to defeat Carter and installed Reagan as their figurehead, the Rich & Powerful have been gaming the system like a weathered veteran of the Texas Hold'em Poker tournaments circuit. Just look at Reagan's rollercoaster economic practices. Like a massive learning curve and they learned from the best, the Oil Block, who for years before was manipulating oil prices.
The R&P even took a giant gamble with Clinton when Bush I was obviously too weak a puppet. It almost didn't pay off when the DotCom wave empowered a few Have-Not's. They needed a new stooge to maintain the illusion that anyone could get rich while inhibiting actual membership.
Enter W. The most successful failure in US history! He presided over a bogus economy. One that thrived despite itself. A wasted governmental surplus, uncounted unemployed (why use Nat. Guard units? to create a false employment picture. Guard members left jobs, these were filled 'temporarily', then stop-loss after stop-loss happened -- its why Obama is trapped with leaving so many troops in theater, the unemployed would skyrocket if they came home!). Go back and look at all the issues which created the economic problems we are now facing. All manipulated money grabbing schemes, bet hedging. Schemes designed to win if they win and win if they lose.
Election 2008: If a Democrat happens to be elected - set up Bail Out with Bush, take money, wait for economic collapse and new GOP government to swoop in and rescue America!
If McCain had won - set up Bail Out with Bush, take money, push 'America loves the GOP for reals' to cow Democratic Congress (again), hire, hire, hire WOOOOOOT! Repugs are greatest thing since sliced bread!
Either way the middle class gets crushed, the social safety net disappears, wages dry up and the R&P pat themselves on the back for saving America. Just like they are doing in China. Some Chinese workers got a raise from >$250 A MONTH to $300 A MONTH and are soooo happy cause they earned >$125 a month as peasant farmers. What do The Corps have to say; 'Yay! us, we are so generous. Why can't the US worker be appreciative? The sweatshop workers of the 1930's knew a good wage when they got it.' Really, this is what they are saying!!! Look it up for yourself I don't want to influence what you find.
Worth a double shot; "These guys are holding out for a Congress that they believe will give them the tax breaks and regulatory relief they expect and have been used to receiving in the past."
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